Intrinsic value is a measure of what an asset is worth.
Intrinsic value is important because it can help investors understand whether the cost of an asset is undervalued or overvalued compared to the market value of the asset.
Formula to calculate intrinsic value.
A strike price or exercise price is the set price at which a derivative contract can be bought or sold when it is exercised.
Suppose the current price of an asset is $10,000, if its strike price is $15,000, calculate the intrinsic value.
Therefore, the assets intrinsic value is $5,000.